Monday, February 8, 2010

[Update: 7PM: There certainly is a reasonable suspicion to believe that the markets are not yet ready to take a plunge under 1044. Although the price retrace seemed sufficient in that it was 44% back up as compared to the [ii] top, perhaps it requires more time. Maybe it does require more price and time. Its hard to say as only the market knows. But the drop from today's high was an example of why I suggested to "shoot first and ask questions later". There are plenty of spots in the squiggles to set a stop mental or otherwise if the short trade goes wrong.

The best thing we got going is that the move down from today's peak looked impulsive, at least on a lot of indexes and at least for the upper half. The next best thing is that most indexes looked like an a-b-c up as in the RUT chart I posted below. We'll find out tomorrow.]

[Update: 6PM: Possible squiggle count for the RUT]

[Update 4:45 PM: The Wilshire (and DOW and SPX...) shows the Head and Shoulders pattern. Today backtested the neckline perfectly. Its not a "classic" looking H and S pattern here yet the sneaky patterns are the ones to look out for. This one is sneaky.

The financials:

The entire countertrend bounce for (ii) of [iii] appears it may be over. It retraced some 45% from the [ii] peak so indeed its a healthy "lull" in the selling action. It stopped at the underside of 1071 resistance. If this is Minute [iii], you wouldn't expect too much more to the upside because the market's primary count is that the "third of a third" or "point of recognition" is upon our doorstep for Minor Wave 1 down.

The alternate (squiggle) count is that (ii) of [iii] has one more push above 1071 in a defiant upward move spurred on by a short squeeze. If that happened, look for dramatic reversal down.

The moves down from peak seem impulsive and forming 5 wave structures although I could certainly make a nice double zigzag down with how it has printed at the moment particularly with a potential expanded flat in the middle of the structure. So the alternate count is that the afternoon drop is a b wave of (ii) of [iii].

However the price action is bearish looking. Choppy craggly upwards this morning, smoothies on the way down in the afternoon.... There is no reason to doubt that a severe selloff of the meaty part of a Minute [iii] is coming. It may not be high on the radar of a lot of people, but indeed, the "setup" looks ideal.

So thats what we'll stick with until the market proves the count incorrect. Don't pay too much attention to any apparent positive divergences because if a "third of a third" is about to happen, they will get wiped out.

[Update: 7PM: There certainly is a reasonable suspicion to believe that the markets are not yet ready to take a plunge under 1044. Although the price retrace seemed sufficient in that it was 44% back up as compared to the [ii] top, perhaps it requires more time. Maybe it does require more price and time. Its hard to say as only the market knows. But the drop from today's high was an example of why I suggested to "shoot first and ask questions later". There are plenty of spots in the squiggles to set a stop mental or otherwise if the short trade goes wrong.

The best thing we got going is that the move down from today's peak looked impulsive, at least on a lot of indexes and at least for the upper half. The next best thing is that most indexes looked like an a-b-c up as in the RUT chart I posted below. We'll find out tomorrow.]

[Update: 6PM: Possible squiggle count for the RUT]

[Update 4:45 PM: The Wilshire (and DOW and SPX...) shows the Head and Shoulders pattern. Today backtested the neckline perfectly. Its not a "classic" looking H and S pattern here yet the sneaky patterns are the ones to look out for. This one is sneaky.

The financials:

The entire countertrend bounce for (ii) of [iii] appears it may be over. It retraced some 45% from the [ii] peak so indeed its a healthy "lull" in the selling action. It stopped at the underside of 1071 resistance. If this is Minute [iii], you wouldn't expect too much more to the upside because the market's primary count is that the "third of a third" or "point of recognition" is upon our doorstep for Minor Wave 1 down.

The alternate (squiggle) count is that (ii) of [iii] has one more push above 1071 in a defiant upward move spurred on by a short squeeze. If that happened, look for dramatic reversal down.

The moves down from peak seem impulsive and forming 5 wave structures although I could certainly make a nice double zigzag down with how it has printed at the moment particularly with a potential expanded flat in the middle of the structure. So the alternate count is that the afternoon drop is a b wave of (ii) of [iii].

However the price action is bearish looking. Choppy craggly upwards this morning, smoothies on the way down in the afternoon.... There is no reason to doubt that a severe selloff of the meaty part of a Minute [iii] is coming. It may not be high on the radar of a lot of people, but indeed, the "setup" looks ideal.

So thats what we'll stick with until the market proves the count incorrect. Don't pay too much attention to any apparent positive divergences because if a "third of a third" is about to happen, they will get wiped out.

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I like to chart and I am an avid student of Elliott Wave Theory. I combine wave theory with standard technical analysis to track market movements and predict future movements.
Disclaimer: I do this for fun (although donations are encouraged!). Due diligence is required on your part as my charts have been known to steer in the wrong direction from time to time.
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